Justice for DHFL's 86000 individual NCD holders-and par' by undoing preferential transfers

Justice for DHFL's 86000 individual NCD holders-and par' by undoing preferential transfers

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DHFL Investor NCD Holder started this petition to Finance Minister and

There are around 86000(note 3) non bank NCD(Non Convertible Debuntures) holders of DHFL, the distressed Housing finance company which has defaulted on its debt. This is a total of 30,000 crores, as compared to ~1 lakh FD(Fixed Deposit) holders who have ~6000 crores worth payment. NCD debt is supposed to be 'senior and secured' vs the FD debt which is 'unsecured'. However, in the draft resolution plan, it is proposed to pay NCD and FD holders at par(Note 2). This is against the law as presently drafted, and against principles of natural justice. DHFL has already cherrypicked its best assets and sold to banks like SBI who have not given cash, instead have 'adjusted' their receivables which the Bombay HC has luckily given an injunction(note 4). The government policy between 2015-2018(which is when most bonds where issued) was to encourage Indians to invest in traded bonds by making it TDS free, as also listing ease. Investors have put their hard earned money assuming that they will be repaid on par with banks but now they are junior to banks/MFs, and on par with FD holders. FD holders are even better off since till recently, they could access funds on 'emergency grounds' which option was not available to NCD holders. NCD Holders are not 'sophisticated' and the resolution plans/updates(Note-1) are not intuitive or easy to understand. They relied on Catalyst(the trustee) who got into action rather late . We therefore request

(a) All stakeholders to note that NCD holders are investing their hard earned money and should get at par treatment with banks and senior treatment to unsecured lenders 

(b) Unwind securitization done without 'cash consideration', so that banks cannot cherry pick the best assets for collection, and all creditors get paid on par

(c) Utilize the Investor Protection Fund to pay dues upto Rs 1lakh; or otherwise consider a mechanism to protect small investors. 

(d) Increase the threshold limit for investors to buy NCDs (like SME stock exchange)so that less investors are affected

References

1) http://www.catalysttrustee.com/wp-content/uploads/2019/10/DHFL_Status-Report-as-on-25.10.2019.pdf

2) http://www.catalysttrustee.com/wp-content/uploads/2019/10/Draft-Resolution-Plan-DHFL.pdf

3)https://www.livemint.com/companies/news/86-000-bondholders-may-be-key-to-dhfl-s-successful-resolution-1562871817099.html

4) https://economictimes.indiatimes.com/mf/mf-news/mutual-funds-object-to-securitisation-deals-by-dhfl/articleshow/71681394.cms

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